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[2010] ZAECPEHC 30
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Chickenland (Pty) Ltd v Singh and Another (134/2010) [2010] ZAECPEHC 30 (15 June 2010)
IN THE HIGH COURT OF SOUTH AFRICA
(EASTERN CAPE – PORT ELIZABETH)
Case
No.:
134/2010
Date
heard:
16
March 2010
Date
delivered:
15 June 2010
In the matter between:
CHICKENLAND
(PROPRIETARY) LIMITED
Applicant
and
GIRISH SINGH
First
Respondent
KAMALAM
SINGH
Second
Respondent
J U D G M E N T
DAMBUZA, J
:
This is an application for summary
judgment.
In the main action
the plaintiff is Chickenland Proprietary Limited, commonly known as
Nandos. The first defendant (the first
respondent in this
application) is Girish Singh. The second defendant (the second
respondent in this application) is Kamalam
Singh, the mother to the
first defendant.
The plaintiff’s
two
claims in the summons are founded on three Deeds of Suretyship
signed by the respondents. The principal debtor in all the
Deeds of
Suretyship is the Leaping Dolphin Fast Food CC, a close corporation
duly incorporated in terms of the Close Corporations
Laws of the
Republic of South Africa.
In the first
claim, the applicant pleads that on 4 April 2009 it concluded a
franchise agreement with the principal debtor, in
terms of which it
granted to the principal debtor the right to operate a franchise
business at Shop 1A Dolphins Leap Shopping
Centre, Beach Road, Port
Elizabeth. The first claim of R145,753.92 is money owing and
payable by the principal debtor to the
applicant in respect of
royalties and marketing fees due in terms of the franchise
agreement. In relation to this claim the
applicant relies on a
Deed of Suretyship (the first suretyship) signed by the respondents
on 20 March 2009, in which the respondents
bound themselves jointly
and severally, as sureties and co-principal debtors
in
solidum
with the principal debtor in favour of the applicant for due and
proper performance by the principal debtor of all its obligations
from any cause whatsoever and in an unlimited amount.
The second claim
relates to a franchise agreement concluded between the applicant and
the principal debtor on 5 April 2009, in
terms of which the
applicant granted to the principal debtor the right to operate a
franchise business at Shop 42, Boardwalk
Casino Complex, Marine
Drive, Summerstrand, Port Elizabeth. This claim is for an amount
of R84,726.44 owing and payable by
the principal debtor to the
applicant in terms of this second franchise agreement. In respect
of the second claim the applicant
relies on two Deeds of Suretyship
signed by the first and second respondents on 20 and 26 March 2009
respectively, in which they
bound themselves jointly and severally,
with the principal debtor as in the first suretyship. The two
franchise agreements
are signed by the first respondent who, in
opposing this application, has deposed to an affidavit on his own
behalf and on behalf
of the second respondent.
In the opposing
affidavit, the first respondent refers to an agreement of sale in
terms of which he bought 80% of the members’
interest in the
principal debtor on 24 February 2009 from four previous members of
the principal debtor. According to the first
respondent 20% of the
members’ interest in the principal debtor remains in the hands
of a certain DA Singh. The effective
date of this sale agreement
was 24 February 2009. At the time of the sale, the principal
debtor had already been conducting
the business which is the subject
of the franchise agreement at the two premises already referred to
above.
A
ccording
to the first respondent when the franchise agreements were
negotiated the applicant was disinclined to continue doing
business
with the four members whose interest was bought by the first
respondent. Consequently, the applicant, and more particularly,
a
certain Mr C Sam, was reluctant to conclude a final and binding
franchise agreement prior to the conclusion of the sale of
the 80%
members’ interest and insisted that no final and binding
agreement would come into existence until the first respondent
had
lawfully acquired 80% of the member’s interest and that the
membership was lawfully transferred to him.
The respondents’
case is that s
uch
intention on the part of the applicant is not recorded in the
franchise agreements and therefore the franchise agreements
stand to
be rectified. The respondents contend that to reflect the true
intention of the parties, the definition of “sale
agreement”
in the franchise agreement should read:
“
The
agreement concluded by Girish Singh in terms of which Girish Singh
purchased 80% of the members’ interest in the franchisee”.
Presently
,
the sale agreement is defined in clause 1.3.2.26 of the franchise
agreements as the agreement concluded by the franchisee (the
principal debtor) in terms of which the franchisee purchased the
business.
Further
to the above, the respondents contend that paragraph 3.1 of the
franchise agreement (relating to suspensive conditions) should
refer
to the sale of members’ interest and that the definition of
“sale agreement” falls to be rectified by
adding the
following at the end of the current definition:
“
.
. . and further provided that Girish Singh becomes the lawful
registered member of 80% of the membership interest in the Franchisee
prior to the date of last signature of this agreement.
”
Presently in both
franchise agreements this paragraph (3
.1)
provides that:
“
This
agreement (other than this clause 3 and 29) is conditional upon the
sale agreement becoming unconditional in accordance with
its terms on
or before effective date or such later date as the parties may agree
in writing.”
In essence t
he
respondents’ case, as I understand it, is that the deeds of
suretyship do not cover the franchise agreements as the franchise
agreements never came into existence because of the unfulfilled
suspensive condition; the details of unfulfilment of the suspensive
condition being the absence of the requisite consent by the 20%
member (DA Singh) to the sale of the 80% members’ interest
as
required in terms of
section 37
of the
Close Corporations Act No. 69
of 1984
. In the opposing affidavit the first respondent states that
the 80% membership interest sold to him by the four members of the
principal debtor was never
lawfully
transferred
to him prior to the last signing of the franchise agreement and
accordingly, no contractual relationship came into existence
either
between the principal debtor and the applicant and also in respect
of the respondents as purported sureties for obligations
towards the
applicant.
It is trite that a
respondent in a summary judgment application does not have to
formulate his/her opposition to the application with the precision
that would be required in the plea; but when he/she advances his/her
contention in resistance to the plaintiff’s claim
he/she must
do so with a sufficient degree of clarity to enable the court to
ascertain whether he/she has deposed to a defence
which, if proved
at trial, would constitute a good defence to the action.
1
All that the court requires, in deciding whether the defendant has
set out a
bona
fide
defence is, (a) whether the defendant has disclosed the nature and
grounds of his defence and (b) whether on the facts so disclosed
the
defendant appears to have, as to either the whole or part of the
claim, a defence which is
bona
fide
and good in law.
2
Whether a defence is
bona
fide
or not depends upon the merits of the defence as raised in the
defendant’s replying affidavit.
3
The sub-rule does not require the defendant to satisfy the court
that his/her allegations are believed by him/her to be true.
It
will be sufficient if the defendant swears to a defence, valid in
law, in a manner which is not inherently or seriously
unconvincing;
or, put differently, if his/her affidavit shows that there is a
reasonable possibility that the defence he/she
advances may succeed
on trial.
4
During argument it
was submitted on behalf of the applicant that even if the amendments
on which the respondents rely are accepted,
in the end they have not
advanced a
bona
fide
defence.
The applicant was prepared, for argument’s sake, to read the
proposed amendments into the franchise agreements.
Mr
Scott
then
submitted, on behalf of the applicant, that when the first
respondent signed the franchise agreements and the suretyship
agreements, approximately a month after the effective date of the
sale of the 80% membership interest he must have either had
the
requisite consent by the remaining member to the sale and transfer
thereof or did not have such consent and fraudulently
entered into
the franchise agreement with the plaintiff. In the event of the
latter, so it was argued, the court should not
come to the
assistance of the respondents as reliance by a party on his own
fraud as a defence would not be
bona
fide
.
I am, unable to
make a finding
,
on the evidence before me, as to which of the two suggested
scenarios prevailed when the first respondent signed the franchise
agreements. As I have stated, in the opposing affidavit the first
respondent merely asserts that the 80% membership interest
was
not
lawfully
transferred to him. It is not clear whether the contention is that
the membership interest
was
transferred but such transfer is tainted by the absence of the
requisite consent or that the membership interest
was
never
transferred
at all. If the membership interest was transferred there is no
evidence on how it was transferred without the requisite
consent.
There is also no explanation as to why the issue of the absence of
consent was never raised prior to the institution
of the action by
the applicant.
A
further submission on behalf of the applicant was that in terms of
the sale of members’ interest agreement, on conclusion
of the
agreement the seller had to deliver to the first respondent an
amended founding statement in the form prescribed by the
Close
Corporations Act which
form had to be appropriately completed and
signed by the sellers. Further, the amended founding statement had
to be lodged
with the Registrar for registration in the prescribed
form within 28 days after the change of membership. The amending
founding
statement had to be signed by or on behalf of
every
member
of the corporation and by or on behalf of any person who would
become a member on such registration.
5
If these steps were taken this would mean that the 20% interest
holder did give his consent to the sale and transfer of the
80%
membership interest. However, the opposing affidavit is silent on
whether these steps were taken towards registration of
the amended
founding statement.
But even with
these concerns, my view is that it would not be proper to grant
summary judgment in this case. What is relevant
is that if the
respondents would prove, at a trial that the requisite consent was
never obtained then a valid defence would have
been established.
The
suspensive conditions in the franchise agreements do stipulate that
the franchise agreements are conditional upon the sale
agreements
being unconditional in accordance with their terms on or before the
effective date. On the papers before me I am
unable to make a
definite finding that the intended change in the membership of the
principal debtor became effective as required
in terms of the Close
Corporation Act. It is my view that there is a reasonable
possibility that if the respondents prove
the absence of the
requisite consent at a trial, a valid defence may be established.
Further, i
t
was submitted by
Mr
Ronaasen
who
appeared on behalf of the respondents that, a further defence which
the respondents have is that the summons do not disclose
a cause of
action as there is no allegation in the summons that the conditional
clause (3.1) was fulfilled. I am not persuaded
by the submission
by
Mr
Scott
,
in reply, that because the plaintiff’s claim against the
respondents is founded on the Deeds of Suretyship rather than
the
franchise agreements such fulfilment need not be pleaded in the
summons. If the defence of non-fulfilment of the conditional
clause
would be available to the principal debtor, it is equally available
to the sureties. It is trite that a surety may rely
upon and plead
all the defences which the principal debtor has against the
creditor, except those defences which are personal
to the principal
debtor.
6
Consequently, my order is as follows:
Summary judgment is refused;
The respondents
are given leave to def
end
the action;
The costs of this
application shall be costs in the cause.
_________________________
N. DAMBUZA
JUDGE OF THE HIGH COURT
Appearances
:
For the
applicant: Adv PWA Scott instructed by Spilkins Attorneys of Port
Elizabeth
For the
respondents: Adv O Ronaasen instructed by McWilliams & Elliot Inc
Attorneys of Port Elizabeth
1
Barclays Western Bank Ltd v
Bill Jonker Factory Services (Pty) Ltd and Another
1980
(1) SA 929
(SE).
2
Maharaj v Barclays National
Bank Ltd
1976 (1) SA 418
(A) at 426.
3
Silverleaf Pastry and
Confectionary Co (Pty) Ltd v Joubert and Another, NN.O
1972
(1) SA 125
(C) at 129.
4
Farlam, Fichardt, Van Loggerenberg; Erasmus on Superior Court
Practice; at B1-224 and the authorities cited therein.
5
See
section 15(1)
of the
Close Corporations Act, Act
No. 69 of 1984.
6
Barclays
National Bank v Von Varendorff
1985 (2) SA 544
(D) at 549.